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Omantel profit soars on backdrop of strong performance of Zain Group

Oman Telecommunications Company S.A.O.G (Omantel. MSM: OTEL announced today the initial consolidated results for the half year ended 30 June 2019. Group revenue for the period has grown to RO 1,258.9 Million compared to RO 914.2 Million of the corresponding period of 2018 reflecting a 38% growth YoY. The group achieved an after tax Net Profit of RO 126.5 Million compared to RO 101 Million in 2018. 

The increase in Group profit is against the back drop of the outstanding performance in key markets of Zain Group notably namely, Kuwait, KSA and Iraq. Zain Group contributed RO 114.8 million (USD 298 Million) to the net profit (before non-controlling interest) of Omantel Group in H1-2019 compared to RO 86.8 million (USD 225.4 Million) in H1-2018 a growth of RO 32.2%. After adjusting for non-controlling interest, Zain group contributed RO 21.4 million (USD 55.5 Million) in H1-2019 compared to RO 18.6 million (USD 48.4 million).

Commenting on these results, Talal Said Al Mamari Chief Executive Officer of Omantel said “We are delighted with these results which clearly reflect the importance and success of our strategic investment in Zain Group that serves around 50 million customers in the region. Zain Group performance has enabled us not only to offset the decline witnessed in the domestic operations but rather to grow our revenues and net profits to new record levels”.

The above performance of Zain Group during half year demonstrates the underlying potential of the investment, which is also reflected by way of increase in the market value of the investment by 17.5% from the date of inception of the investment.  

H1-2019 includes the effect of consolidation of results of Zain KSA whereas in H1-2018 Zain KSA was an associate and as such only share of profits/losses were considered in the results. Zain KSA is consolidated with effect from Q3-2018. Consolidation of Zain KSA resulted in additional RO 423.6 million in revenue (USD 1.1 billion) and RO 194.8 million in EBITDA (USD 506 million).

On the domestic front, the performance was subdued on account of significant challenges faced by the sector on account of market saturation in the Mobile segment. Omani market is characterized by having one of the highest mobile penetration rates globally (143.33% of the population).Domestic operations cover Fixed Line business, Mobile business, Omantel International (OTI)-Wholesale arm of Omantel engaged in international voice aggregation business, Oman Data Park and Internet of Things.


Operational review of key markets for the six months ended 30 June 2019

Oman:  Oman operation witnessed an 8.8% decline in Net profit in the half year compared to corresponding period in year 2018 mainly due to reduction in Mobile prepaid revenues despite increase in data consumption and IRU capacity sales. However, growth in fixed broadband, ICT and Cost optimization initiatives have contributed in managing the margins. Revenue generated for the period reached RO 259.8 million (USD 675 million) and net income reached RO 39.2 million (USD 102 Million) compared to RO 42.8 million (USD 111 Million) in 2018.  EBITDA amounted to RO 101.6, with EBITDA margin standing at 39.1% for the period. Fixed line revenues grew by 4.0% Y-o-Y whereas Mobile revenues decreased by 10.3%.

Zain Group

Zain Group contributed RO 114.8 million (USD 298 Million) to the net profit (before non controlling interest) of Omantel Group in H1-2019 compared to RO 86.8 million (USD 225.4 Million) in H1-2018 a growth of RO 32.2%.   After adjusting for non controlling interest Zain group contributed RO 21.4 million (USD 55.5 Million) in H1-2019 compared to RO 18.6 million (USD 48.4 million).

Interest costs incurred by Omantel Group relating to Zain acquisition is RO 26.2 Million in H1-2019 (H1-2018: RO 29.2 Million) and is accounted at Omantel Group level and is not part of Domestic performance.


Key operational highlights of Zain Group

Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.8 million in a very challenging period that witnessed improving Net Income for the quarter. The Group’s most profitable operation saw its H1 2019 Revenue reach KD 165 million (USD 544 million), and Net Income increase by 10% to reach KD 44 million (USD 144 million). Zain Kuwait’s EBITDA amounted to KD 65 million (USD 213 million), an 18% increase Y-o-Y, reflecting an EBITDA margin of 39%. Data Revenue grew by 9% Y-o-Y, representing 37% of total Revenue.

Saudi Arabia: The operator continues to grow all its key financial metrics, recording Net Income for the last four consecutive quarters. For H1 2019, Zain KSA generated Revenue of SAR 4.2 billion (USD 1.1 billion), a 17% increase compared to the same period in 2018. EBITDA for H1 2019 amounted to SAR 1.9 billion (USD 506 million), up 60% Y-o-Y, reflecting an EBITDA margin of 46%. Net Income for the period soared to reach an unprecedented SAR 260 million (USD 69.2 million), reflecting a significant turnaround on the H1 2018 Net Loss of SAR 115 million (USD 30.6 million). Data Revenue represents 44% of total Revenue and customers served reached 8.3 million.


Iraq: Zain Iraq performed exceptionally well in H1 2019 when compared to H1 2018 with Revenue reaching USD 522 million and EBITDA reached USD 220 million, up 14% reflecting an EBITDA margin of 42%. The operation reported a Net Income of USD 25 million for H1 2019, up 39% on the USD 18 million profit recorded for H1 2018. The operator added 600,000 customers (up 4% Y-o-Y) to reach 15.3 million and witnessed significant growth in data Revenue, as well as profitable progress in the enterprise (B2B) segment.

Sudan: Despite the ongoing social and economic issues in the country, the operator continues to perform well in local currency (SDG) terms, as Revenue grew by 45% Y-o-Y to reach SDG 6.4 billion (USD 138 million, down 18% in USD terms) for H1 2019. EBITDA increased by 36% to reach SDG 2.4 billion (USD 52 million, down 23% in USD terms), reflecting an EBITDA margin of 37%, while Net Income increased by 31% to reach SDG 900 million (USD 19 million, down 30% in USD terms). Data Revenue formed 16% of total Revenue, with an impressive growth of 31% (Y-o-Y) in SDG terms. Zain Sudan saw its customer base expand 9% to reach 15.1 million customers.

Jordan: Zain Jordan serves a customer base of 3.7 million at the end of June 2019, maintaining its market leading position. Y-o-Y Revenue was stable at USD 240 million, with EBITDA up 17% to reach USD 113 million, reflecting a 47% EBITDA margin. Net Income increased 9% to USD 39 million in H1 2019. With the continual expansion of 4G services across the country, Data Revenue grew by 4%, representing 40% of total Revenue.


Bahrain: Zain Bahrain generated Revenue of USD 81 million for the first six months of 2019. EBITDA for H1 2019 increased by 41% to reach USD 28 million, reflecting an EBITDA margin of 35%. Net Income amounted to USD 6.7 million, reflecting a 9% increase Y-o-Y. Data Revenue represents 48% of overall Revenue.